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Conberting Systems, Inc. v. Hot-Line Freight System

November 26, 2003


Appeal from the Circuit Court of Cook County No. 02 M1 127348 Honorable John G. Laurie, Judge Presiding.

The opinion of the court was delivered by: Justice Smith


A machine shipped by plaintiff Converting Systems, Inc. (CSI), was damaged during transport by defendant, carrier Hot-Line Freight System, Inc. (Hot-Line). CSI sued Hot-Line under federal law for repair costs of more than $25,000. The circuit court of Cook County entered judgment for CSI in the amount of $2,500 and, on Hot-Line's motion pursuant to section 2-619(a)(9) of the Code of Civil Procedure (735 ILCS 5/ 2-619(a)(9) (West 2002)), dismissed the complaint to the extent that it sought damages greater than that amount. On appeal, CSI contends the court improperly limited Hot-Line's liability for damages absent actual notice of the liability limitations contained in Hot-Line's tariff. For the reasons that follow, we vacate the judgment.

According to the undisputed facts, in November 2001, machinery supplier CSI entered an agreement with a shipping broker to transport a machine from Addison, Illinois, to Shawano, Wisconsin. The bill of lading for the shipment was prepared by CSI and included minimal information: the departure and destination addresses, the name of the carrier (Hot-Line), the shipping broker's "third-party" billing address, a brief description of the four items shipped (one "rebuilt in-line bag machine," a crate, a box, and "wood for skid") and the weight of the shipment (5,000 pounds). The bill included the typewritten name of a CSI employee, Todd Ayer, indicating the bill was "Checked by" him, but it was signed only by a Hot-Line employee. The bill also had Hot-Line's shipping label affixed to it.

The shipment was refused by the recipient for being damaged and it was sent back to CSI. CSI rebuilt the machine at a cost of $25,460.

CSI sought reimbursement of the repair costs from Hot-Line and the shipping broker, and ultimately filed a complaint for property damage of $25,460 under the Carmack Amendment to the Interstate Commerce Act (Act) (49 U.S.C.A. §14706 (West 1996)).

Hot-Line filed a section 2-619(a)(9) motion to dismiss the complaint (see 735 ILCS 5/2-619(a)(9) (West 2002)), to the extent that it sought damages above $2,500. The motion alleged that: under the Carmack Amendment (49 U.S.C.A. §14706(c)(1)(a) (West 1996)), its liability was limited to the released rate; the released rate (of $.50 cents per pound), set forth in Hot-Line's tariff, totaled $2,500; and CSI, as a "sophisticated shipper," was by law charged with knowledge of the applicable tariff and had an affirmative duty to request the tariff rate, but it did not do so. The motion was based on three federal cases, EFS National Bank v. Averitt Express, Inc., 164 F. Supp. 2d 994 (W.D. Tenn. 2001), Siren, Inc. v. Estes Express Lines, 249 F.3d 1268 (11th Cir. 2001), and Neiman Marcus Group, Inc. v. Quast Transfer, Inc., No. 98 C 3122 (N.D. Ill. 1999), in which liability limitations in shipper-prepared bills of lading were upheld.

Hot-Line supported its motion with an affidavit of its director of loss and claim damage, Al Chojnacki (Chojnacki affidavit). Chojnacki stated that Hot-Line maintained its shipping rates in its tariff, which was in effect at the relevant time, the tariff was available to CSI upon request, and CSI did not declare a higher value for the items shipped or elect a higher rate to avoid the tariff's liability limits. Chojnacki also stated that trade practice and custom provide that terms of the standard form bill of lading are incorporated into a bill of lading prepared by a shipper and that any shipment is subject to the carrier's liability limits and tariffs.

After responding to Hot-Line's motion, CSI was later allowed to file a counteraffidavit from its vice-president and treasurer, Todd Ayer (Ayer affidavit). Ayer stated he arranged the shipment at issue through the shipping broker and he prepared the bill of lading, which did not refer to Hot-Line's tariff, but he was not offered a lower freight rate in exchange for reduced liability. Ayer also contradicted Chojnacki's account of industry custom, stating that a carrier's tariff is not, by custom, automatically incorporated into the bill of lading.

The trial court entered judgment for $2,500 in CSI's favor and against Hot-Line, and granted the motion to dismiss "to the extent [the complaint] seeks damages in excess of $2,500." The written order does not give the court's reasoning for its decision, which was apparently based on its interpretation of federal case law.

On appeal, CSI contends the trial court erred by limiting Hot-Line's liability because it (CSI) had no actual notice of the liability limitations contained in Hot-Line's "unpublished tariff." CSI relies primarily upon Hillenbrand Industries Inc. v. Con-Way Transportation Services Inc., No. NA 00-0255-C-BS (S.D. Ind. 2002), for its contention that, absent a written agreement concerning limitation of liability or "actual notice" of such limitation, Hot-Line's purported limitation of liability is not enforceable under the Carmack Amendment.

Section 2-619 of the Illinois Code of Civil Procedure (735 ILCS 5/2-619 (West 2002) provides for dismissal of a complaint upon the trial court's consideration of issues of law or easily proved issues of fact. Neppl v. Murphy, 316 Ill. App. 3d 581, 585, 736 N.E.2d 1174 (2000). A motion for section 2-619 dismissal admits the legal sufficiency of the complaint but raises some affirmative matter, appearing on the face of the complaint or established by external submissions, which defeats the plaintiff's claim. Neppl, 316 Ill. App. 3d at 584. Dismissal is allowed where "the claim asserted against defendant is barred by other affirmative matter avoiding the legal effect of or defeating the claim." 735 ILCS 5/2-619(a)(9) (West 2002). Such affirmative matter has been defined as "a type of defense that either negates an alleged cause of action completely or refutes crucial conclusions of law or conclusions of material fact unsupported by allegations of specific fact contained in or inferred from the complaint." Neppl, 316 Ill. App. 3d at 585.

In ruling on a section 2-619 motion to dismiss, the trial court may consider pleadings and affidavits. Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 116, 619 N.E.2d 732 (1993). On appeal of a section 2-619 dismissal, a reviewing court considers "whether the existence of a genuine issue of material fact should have precluded the dismissal or *** whether dismissal is proper as a matter of law." Kedzie & 103rd Currency Exchange, Inc., 156 Ill. 2d at 116-17. The standard of review is de novo. Neppl, 316 Ill. App. 3d at 583.

The issue raised on this appeal is governed by the statutory scheme set forth in the Carmack Amendment, as interpretation of federal law was the presumed basis for the dismissal of CSI's complaint. See 49 U.S.C.A. §14706 (West 1996). The parties have not cited, nor has our research revealed, any Illinois cases concerning the precise issue raised here. However, we are provided direction by decisions of the federal courts interpreting the liability provisions of the Carmack Amendment. Hot-Line correctly notes that we are not bound by those decisions (see Gilbert's Ethan Allen Gallery v. Ethan Allen, Inc., 162 Ill. 2d 99, 103, 642 N.E.2d 470 (1994)), but nonetheless urges us to rely upon EFS National Bank, 164 F. Supp. 2d 994, Siren, Inc., 249 F.3d 1268, and Neiman Marcus Group, Inc., No. 98 C 3122. Hot-Line also maintains that Hillenbrand was wrongly decided and asserts that consideration of this appeal requires us to ...

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